A wave of pessimism swept through Dalal Street as the Sensex and Nifty continued their descent, reacting to the US Federal Reserve's latest policy announcement. Despite a widely anticipated rate cut, the Fed's hawkish tone on future rate cuts and inflation projections sent shivers down investors' spines, triggering a global sell-off that rippled through Indian markets. This marked the fourth consecutive day of losses for the benchmark indices, wiping out over Rs 10.5 lakh crore in investor wealth.
Market in free-fall:
The Nifty 50 breached the crucial 24,000 mark, ultimately closing at 23,952, a decline of 247 points or 1 percent. The Sensex mirrored this downturn, plummeting by 964 points to settle at 79,218. This broad-based sell-off saw over 2,300 stocks ending in the red on the BSE, with almost all sectoral indices losing ground.
Fed's Hawkish stance:
While the Federal Reserve delivered a 25 basis points rate cut as expected, it was the forward guidance that caught markets off guard. The Fed revised its inflation forecast for 2025 upwards and signaled fewer rate cuts than anticipated, dashing hopes of aggressive easing. This hawkish stance, coupled with Fed Chair Jerome Powell's cautious remarks on inflation, triggered a wave of volatility and risk aversion in global markets.
Impact on sectors and stocks:
Interest-rate sensitive sectors like banking and real estate bore the brunt of the sell-off. Technology stocks, heavily reliant on exports to the US, also took a hit as a stronger dollar and higher bond yields threatened to dampen demand. Pharma stocks emerged as a rare bright spot, with prominent names like Dr Reddy's Labs and Cipla gaining ground. However, Nestle India, Asian Paints, and IndusInd Bank hit their 52-week lows, highlighting the widespread impact of the market downturn.
Expert outlook:
Analysts are closely watching the 200-day exponential moving average (DEMA) around the 23,700 level for the Nifty, a crucial support level that could determine further downside. While the market remains weak, oversold conditions and resilience in select pockets present stock-specific buying opportunities.
The Fed's hawkish commentary has cast a pall over the Indian stock market, triggering a significant sell-off and raising concerns about the market's near-term outlook. While the rate cut itself may have limited long-term impact, the Fed's cautious stance on inflation and future easing has spooked investors. As the market grapples with this uncertainty, investors are advised to remain vigilant and focus on stock-specific opportunities while keeping a close eye on key support levels. This episode underscores the interconnectedness of global markets and the significant influence of the US Federal Reserve on investor sentiment worldwide.
